10 Financial Myths Busted by the Recession

Seems like the biggest problem that many of us are having is that a number of our beliefs in “the way things work” have melted before our eyes. I remember believing, a few short moths ago, that things would be fine, because Bernanke and Paulson are really smart guys and they know how to handle things like this.

While history may prove me correct, many of the “things” that have happened in recent times were beyond our experience or realm of possibility.

Kiplinger has put together a list of 10 Financial Myths that we have held tight and that have been de-myth-ified in this current financial turmoil. One things for sure…we’ll be smarter after this is all over ( albeit less monied).

Here’s #2 – Real Estate

MYTH 2: Real estate behaves differently from other investments. Call it a bubble instead of a boom if you like, but it was supposed to be “proof” that real estate returns don’t strongly correlate with the returns of stocks and other financial investments. The message: Rental properties or real estate investment trusts can make money despite drops in Standard & Poor’s 500-stock index or the Nasdaq. Wrong. REITs lost 38% in 2008 because the credit crunch and overly aggressive expansion plans hammered profits and dividends. REIT returns used to have little correlation with the stock market. Now they closely track it.